Instant cash out comes to Venmo

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Venmo, the PayPal-owned digital peer-to-peer (P2P) transfer service, is officially launching instant bank transfers following a pilot held last summer. The new service requires a Visa or Mastercard debit card, and will allow users to instantly (within 30 minutes) cash out their Venmo balance for a flat $0.25 fee.

It won't replace the existing free option, which takes longer, and will roll out to all Venmo users over the next few days.

The move represents a clear push for Venmo to catch up to competition.

Venmo needs to monetize while also innovating enough to stay afloat in an increasingly competitive space.Venmo isn't yet profitable for PayPal, which could prove increasingly problematic as its growth begins to eat into PayPal's overall volume. And at the same time, the industry is becoming crowded, with a mounting threat from bank-based Zelle, which has access to 86 million users, the entrance of Apple Pay, and the fast growth of Square Cash, which is outpacing Venmo in active user growth. That means that the service needs to find a way to limit churn and increase profitability, especially in a space that's dependent enough on networks that the loss of a few customers could quickly multiply.

Instant cash out isn't perfect, but it has the potential to help.Customers want fast and convenient access to P2P funds. And as offering faster payments mainstreams, it's becoming a must-have service, especially since both Square Cash and Zelle have comparable offerings. But the service, which is one in a series of moves Venmo has made to keep pace with the rapidly evolving space, could be too-little, too-late, since Zelle's offering is free by default, and Square Cash's 1% fee makes it cheaper than Venmo if a cashout is less than $25 — far above the average P2P transaction value. And so while offering instant cash out is critical, since it ensures that Venmo remains a comparable offering and could help limit churn, it's unlikely to help on the monetization front, forcing Venmo to rely on other initiatives, like business-to-consumer (B2C) payments, to become lucrative.

Forecasts the growth of the P2P market, and what portion of that will come from mobile channels, through 2021.

Explains the factors driving that growth and details why it will come from increased usage, not increased spend per user.

Evaluates why mobile P2P isn't profitable for companies, and details several cases of attempts to monetize.

Assesses which of these strategies could be most successful, and what companies need to leverage to succeed in the space.

Provides context from other markets to explain shifting trends.

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